Ad hoc networks have emerged recently as an important trend of future wireless systems. The evolving wireless networks are seriously challenging the traditional OSI layered design. In order to provide high capacity wireless access and support new multimedia network, the various OSI layers and network functions should be considered together while designing the network. In this thesis, we briefly discuss performance optimization challenges of ad hoc networks and cross-layer design. Ad hoc wireless networks were implemented by using Network Simulator NS-2 and the wireless physical, data link, dynamic source routing (DSR) routing protocol models have been included in the simulation. Simulations show that the performance begins to drop at the moderate offered load due to congestion. In addition, the mobility and fading cause the route failures and packet loss in wireless environment. To improve the performance for wireless networks, we implemented a congestion-aware cross-layer design in NS-2. The MAC layer adaptively selects a transmission data rate based on the channel signal strength information from physical layer and congestion information from network layer. The MAC layer utilization gathered at MAC layer is sent to DSR as a congestion aware routing metric for optimal route discovery. We modified the source codes of 802.11 MAC layer and DSR protocol. The simulations show that rate adaptation in MAC layer improves the network performance in terms of throughput, delivery ratio, and end-to-end delay; using congestion information from MAC layer in routing discovery improves the performance of the network benefited from overall network load balance.